The measure, which will not take effect until 1 January 2002, is a significant simplification for all European firms with taxable activities in a member state other than the one in which they are established.

It provides that:

The appointment of a tax representative or agent will no longer be an obligation but an option for European traders carrying out taxable transactions in another Member State;

Member States will retain the possibility of deciding that the recipient should be liable to VAT (reverse charge system) in business relations between taxable persons.

According to the European Commission, the move will ‘eliminate complex, obligatory VAT formalities that were extremely costly for millions of firms within the internal market’.

Commissioner Frits Bolkestein welcomed the move, saying other proposals must now be adopted to simplify the VAT regime, notably as regards the right of non-established traders to deduct VAT.